The accounts receivable turnover of a company , which has net sales of $2,200,000 and average accounts receivable of $440,000 is 5.0 for the period.
Accounts receivable turnover is an accounting metric used to measure the efficiency of collecting accounts receivable from customers and the effectiveness of credit sales. In other words, accounts receivable turnover is an activity indicator that indicates a company's ability to convert its liabilities into cash. Generally, the higher the ratio, the more efficiently the company can process collectibles. Debt turnover ratio is calculated by the following formula:
Accounts Receivable Turnover = Net Credit Sale / Average Accounts Receivables
We have , A company Net sales= $2,200,000
average accounts receivable = $440,000
Using above formula,
Accounts Receivable Turnover
= $2,200,000/$440,000
= 220/44 = 5
Hence, required period is 5 ..
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